Daily Quommentary: U.S. Economy
May 04, 2001 - 10:35:48 HKT
QuamResearch
We are not yet convinced that the U.S. economy has hit its bottom, and our suspicion was supported by last night's economic figures. First-time unemployment benefits and job cut announcements rose further in the United States, signaling tough times have not ended yet.
According to a U.S. government report released yesterday, first-time applications for state unemployment benefits rose to 421,000 for the week ended April 28, reaching the highest level in more than five years. One would not be surprised if the jobless rate marches to 5% by the end of 2001 from March's 4.3%.
U.S. stocks tumbled last night on hearing a surge in jobless claims, intensifying renewed fears of a prolonged recession. We fear that the rebound which started in early April has ended. The Nasdaq Composite fell 74 points, or 3.35%, to end at 2,146; the Dow lost 80 points to 10,797; and the broader S&P 500 fell 19 points to 1,249.
As New York coughs, Hong Kong will inevitably get a cold. Leaders of local TMTs, China Mobile (941), Unicom (762) and Legend (992), which have rebounded some 40% and 50% to yesterday's intraday highs of $42.80, $12.20 and $6.95, could be ripe for renewed sell-offs.
This morning, there were news reports that the mainland's regulatory authority had taken measures to forbid mainland capital from being used for trading in Hong Kong shares through mainland securities brokers. This piece of news could have a short-term impact on some speculative H shares and red chips, but as long as the price gaps between Hong Kong-listed mainland companies and their corresponding A shares exists, mainlanders will make use of whatever channels are available to buy on the cheaper market. Mainland treasure hunters are very likely to continue fueling these shares to higher levels until their valuations are close to prices in mainland China.
There are still a number of fairly priced red chips, for example, Citic Pacific (267), Shanghai Industrial (363), Cosco Pacific (1199), and H shares, like PetroChina (857), Sinopec (386), SD Power (1071), Angang New Steel (347) and Chongqing Iron (1053), appealing to more aggressive investors. Should there be a short-term adjustment, this could be a good chance to accumulate them on the dip. (end)
quamnet.com
--------------------------------------------------------------------------------
Copyright 2000 Quam(IA) Limited, All rights reserved |
